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Croatia Financial Regulation News: Euro Introduction, New Regulations and Sustainability Linked Bonds

In 2023, Croatia underwent significant changes in its banking and financial sector, driven by the introduction of the euro as an official currency, new regulations, and a growing focus on sustainable financing.

The Euro’s Arrival

The euro became Croatia’s official currency on January 1, 2023, with a dual disclosure period set to end on December 31, 2023. This measure aims to prevent unjustified price increases by requiring businesses to display prices in both euros and kuna using a fixed conversion rate.

Banking and Finance Sector Preparedness

Banks, financial institutions, the Zagreb Stock Exchange, and the Central Depository & Clearing Company Inc (SKDD) have adapted to this significant change. Despite the high inflation rate, Croatia’s banking and finance market appears well-prepared for the new official currency.

Regulatory Changes

Regulatory changes in 2023 centered on anti-money laundering (AML) and cryptocurrency business. Two key acts were introduced:

  • Amendment to the Croatian Act on the Prevention of Money Laundering and Funding of Terrorism: took effect on January 1, 2023
  • Regulation governing virtual asset service providers: entered into force on July 6, 2023

Croatia is aligning itself with European Union directives on AML, extending these regulations to include cryptocurrency businesses. This move aims to prevent money laundering and terrorist financing in the country’s financial sector.

Sustainable Financing

Sustainable financing has gained traction in recent years, with banks offering sustainable loans for entrepreneurs aiming to make their businesses climate-resilient. In 2022, Meritus Ulaganja Joint Stock Company issued sustainability-linked bonds worth €40 million, committing to:

  • Reduce carbon emissions by 25%
  • Increase the representation of women in management teams to 51%

In 2023, Zagrebacki Holding took this a step further with the largest single issue of bonds related to sustainable business in Croatia’s history, valued at €305 million. The company has set sustainability goals, including:

  • Elevating waste separation
  • Increasing renewable energy consumption

Looking Ahead

Looking back on 2023, it is clear that Croatia is focusing more on the development of its banking and financial services sector. The introduction of new regulations and the issuance of sustainability-linked bonds have had a significant impact on the country’s financial market. It is likely that these positive changes will continue to develop in 2024, with the banking and financial services sector expected to grow in a positive direction.